The long-term goal of this proposal is to understand the molecular and cellular mechanisms, which allow the acquisition of the terminal photoreceptor cell (PR) fate. The formation of PR's in Drosophila melanogaster serves as a paradigm to understand cell type determination and differentiation. During larval stages, an exquisitely precise series of sequential inductive processes leads to the recruitment of eight PR's in each ommatidium. However, their final differentiation, including rhabdomere morphogenesis and opsin expression is only completed three days later during pupal development. It is thought that PR cell fate is irreversibly established during larval development, when each PR expresses a particular set of transcriptional regulators. The PI's preliminary studies show that spalt complex genes are required late for the establishment of rhabdomere morphology and opsin expression in inner PR's, but not for their correct projection to the optic lobe. These data indicate that PR differentiation occurs as a two-step process under different genetic regulation. The following specific aims are proposed to further understand the mechanisms involved in the terminal differentiation processes: The role of the spalt genes in terminal PR differentiation will be addressed by analyzing (1) the loss-of-function phenotype of individual spalt genes (spalt major and spalt related); (2) the gain-of-function phenotype induced by the misexpression of the spalt genes. (3) Genetic interactions between spalt and otd, another gene involved in terminal PR differentiation, will be addressed. (4) The identification of downstream targets of spalt will be carried out by testing the role of genes that we previously identified to be expressed in inner PR's. The overall strategy of retinal cell fate determination and differentiation is the same in vertebrate and Drosophila retina, as are many of the factors employed. The understanding of how retinal cells adopt their final cell shape and structures is of obvious significance to developmental processes and to many human retinal diseases.